Desktop Metal expedites expansion despite missing Q4 2020 revenue expectations

Announcing its first financial results since going public, metal 3D printer manufacturer Desktop Metal has revealed that it fell 10% short of analyst revenue expectations during the course of Q4 2020. 

Desktop Metal, via a SPAC, listed on the NYSE last year. The Burlington-based business generated $8.4 million in revenue, 10% less than the $9.3 million guidance expected by analysts. On a quarterly basis, Desktop Metal’s revenue rose from $2.5 million in Q3 2020 to $8.4 million in Q4, a sequential increase of 236%. 

The firm’s rapid quarterly growth can largely be attributed to the launches of its Production P-1 and Shop Systems, in addition to the $2.45 million contract it received from the U.S. Department of Defense.  Given its mixed revenue results, Desktop Metal’s shares have remained fairly stable since their publication, currently sitting at $20.61, slightly less than its opening price of $20.80.

According to Ric Fulop, CEO and Co-founder of Desktop Metal, the company’s aggressive expansion strategy has positioned it well to take advantage of the growth opportunities that lie ahead. “The fourth quarter of 2020 was transformative for our company, and we achieved key milestones in our path to driving the adoption of AM,” said Fulop. 

“Our acquisition of EnvisionTEC in February strengthens our market position by adding a compelling lineup of production-focused photopolymer printers and over 190 qualified materials to our portfolio,” he added. “We are excited to continue building on our strong momentum, by capitalizing on both high levels of customer interest and inorganic opportunities in the space, as we enter this next chapter.”

The Desktop Metal Shop System. Image via Desktop Metal.
Desktop Metal has set its sights on continued expansion despite not hitting analyst expectations during Q4 2020. Photo via Desktop Metal.

Desktop’s FY 2020 financials 

Although Desktop Metal hasn’t released a complete breakdown of its fourth quarter by segment, it has provided greater detail on its full-year financials. Broadly, the company reports its revenue across two main segments: Products and Services, with the former generating the majority of its annual revenue. 

During FY 2020, the firm’s Product division brought in $14 million in revenue, 39% less than the $23 million reported over the course of last year. While speaking on a call with analysts and investors, Fulop explained that due to COVID-related travel restrictions, Desktop Metal was unable to ship its Shop system until late in Q4, which impacted on its system sales. 

The company’s Service revenue also fell between Q4 2019 and Q4 2020, dropping from $3.7 million to $2.8 million. Like its competitors, Desktop Metal’s ability to conduct routine maintenance visits has been severely limited since the start of the pandemic, reducing any opportunities for it to generate extra sales in this area. 

It’s also worth noting that the firm made a net loss of $90.4 million last year, something it has attributed to various expenses related to its IPO. The move effectively forced Desktop Metal to increase its headcount and fork out for corporate, legal and insurance fees, but Fulop has emphasized that these are non-recurring payments, and he expects to see the firm return to profitability in future. 

Revenue ($)Products Services Total Profit/Loss
FY 201922.7m3.7m26.4m-104m
FY 202013.7m2.8m16.5m-91m
Variance (%)-39-24-38+13

Expanding into new verticals

Alongside the release of its financials, Desktop Metal also announced the launch of ‘Desktop Health,’ a new Californian subsidiary focused on patient-specific 3D printed healthcare solutions. Led by CEO Michael Mazen Jafar, Desktop Health intends to use the 3D Bioplotter platform acquired from EnvisionTEC along with its existing portfolio, to create bioprinted tissues and implants for medical applications.

“Today the world manufactures more than $85 billion in medical and dental implants each year,” explained Fulop. “We think a large percentage of these parts could be printed and made patient-specific before the end of the decade, making this market a key opportunity for Desktop Metal.”

While Desktop Metal’s entry into the healthcare sector will no doubt bear fruits in the years to come, its recent acquisitions and launches should also provide it with ample opportunity for growth in the near-term. For instance, the company’s acquisition of EnvisionTEC has not only allowed it to access a ready-made revenue stream, but to enter the lucrative polymer 3D printing market. 

In terms of the firm’s proprietary product line, its recently-launched Shop Machine and Studio System 2 will enable it to target new clients in the automotive and electronics industries, driving increased revenue as a result. Recently, Desktop Metal also partnered with Uniformity Labs to launch a novel sinterable aluminum powder, a move that reflects its commitment to organic as well as inorganic growth. 

A row of EnvisionOne 3D printers.
Desktop Metal’s acquisition of EnvisionTEC has provided it with access to a ready-made revenue stream. Photo via EnvisionTEC.

An ambitious outlook for 2021 

Looking to the year ahead, Desktop Metal is anticipating moderate growth between Q4 2020 and Q1 2021, followed by “more substantial acceleration” from Q2 onwards. In fact, the company is predicting such a significant increase in sales activity during 2021, that it expects to generate over $100 million in revenue, a rise of over 600% compared to 2020. 

In order to achieve its lofty revenue ambitions, Desktop Metal has earmarked some of the $595.4 million it had in reserve at the turn of the year for further acquisitions, but according to the firm’s CFO James Haley, the company also remains focused on achieving growth on all fronts, including building on its existing portfolio. 

“Over the past few months, we have significantly expanded our sales, marketing, engineering and admin teams, to ensure that we are well-positioned to fast-track organic growth,” concluded Haley. “[In 2021] we plan to hit the accelerator on growth, and to continue making substantial investments in both organic and inorganic opportunities.”

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Featured image shows an engineer using Desktop Metal’s Shop System. Photo via Desktop Metal.